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What Does Russel Metals Inc’s (TSE:RUS) Share Price Indicate?

Devin Koller

Russel Metals Inc (TSE:RUS), a trade distributors company based in Canada, saw significant share price volatility over the past couple of months on the TSX, rising to the highs of CA$30.64 and falling to the lows of CA$26.5. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Russel Metals’s current trading price of CA$28.57 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Russel Metals’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Russel Metals

What is Russel Metals worth?

According to my valuation model, the stock is currently overvalued by about 32.41%, trading at CA$28.57 compared to my intrinsic value of CA$21.58. This means that the opportunity to buy Russel Metals at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Russel Metals’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Russel Metals generate?

TSX:RUS Future Profit August 10th 18

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 16.96% in the upcoming year, the short-term outlook is positive for Russel Metals. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in RUS’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe RUS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on RUS for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for RUS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Russel Metals. You can find everything you need to know about Russel Metals in the latest infographic research report. If you are no longer interested in Russel Metals, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.